Description of interest rates:

Interest rates - the rates set by central banks. They are applicable to currency transactions with other financial institutions. With the help of interest rates a central bank is capable to make an impact on interest rates of commercial banks, inflation level of the country and national currency rate. Interest rates are the significant component that influences the currency rate. Reduction of interest rates inevitably brings increase in business activity and rise inflation rate. In case of increase in interest rates the level of business activity drops, inflation declines and the national currency strengthens. Considering the fact that 70% of all Forex transactions are carried out in the US Dollars, the change in the US interest rates bears the highest importance for the currency market.

Federal Funds Rate - the interest rate at which member banks of The Federal Reserve System obtain short-term overnight credits. The decision about federal funds rate fluctuation is in the terms of reference of the Federal Open Market Committee (FOMC). The decision about fluctuation of the key interest rate in the USA is made by the Federal Open Market Committee (FOMC) of the Federal Reserve System of the USA during its meetings. The Committee holds 8 meetings per year concerning the question of key interest rates fluctuation. The meetings are usually held on Tuesdays. The first and the fourth meetings of the year are exceptions because they are usually held for two days (Tuesday and Wednesday). The result of the meeting is announced at 6.15 pm GMT either on the day of the meeting or on the second day of the meeting if the meeting was held over two days. The Minutes of the meeting are published a few days after the following scheduled meeting.

Refinancing Tender - the European analogue of the Federal Funds Rate. Refinancing Tender is the minimum possible interest rate for requests for obtaining funds in the European Central Bank tender. Every two weeks ECB holds a tender to float funds, which is necessary for upholding liquidity in the financial system. This is the minimal rate at which ECB runs transactions on the open market. The decision about key interest rates fluctuation in Europe is made by the Governing Council of the European Central Bank. Since the 7th of January 1999, Council meetings are held on Thursdays once every two weeks. Exceptions in the meetings schedule are made only during holiday periods and during the period of summer vacations in ECB.

Overnight Call Rate Target- Japanese analogue of Federal Funds Rate. It is the interest rate at which the Bank of Japan obtains overnight credits.

Bank Rate - interest rate at which the Bank of England offers credits according to the repossession scheme, i.e. Bank of England buys short-term stocks from banks with an obligation to sell them back to the same banks in a certain stipulated time. The decision about key interest rates changes in the UK is made by the Bank of England Monetary Policy Committee during its monthly meetings. The meeting of the Bank of England Monetary Policy Committee is held for two days. Usually it is the Wednesday and Thursday following the first Monday of each month, but sometimes there are exceptions when the meetings are held on Tuesday and Wednesday. The result of the Monetary Policy Committee meeting is announced at noon GMT on the second day of the meeting. The Minutes of these meetings are published on Wednesday following the week of the meeting.

The Bank of Canada carries out its monetary policy by raising and lowering the target for the Overnight Lending Rate which serves as an interest rate for main financial institutions to borrow and lend one-day funds among themselves. This target for the overnight rate is also known as key policy rate.Changes of the target for the Overnight Rate usually lead to moves in the prime rate at commercial banks, which serves as a benchmark for many of their loans. Such changes generally affect the rates on housing and other loans.

The major banking rates of Riksbank are the Deposit Rate, the lending rate and the Repo Rate. The repo rate is the most important key rate according to which a central bank repurchases government securities from the commercial banks.

The Reserve Bank of Australia originates on 14 January 1960 to function as Australia's central bank and banknote issuing authority. Central bank shall set up the interest rates of a nation's economy for its regulation. The major cash rate fully depends on the transfers between central bank and institution. Changes of this rate can indirectly affect mortgage rates and the interest paid to consumers on bank accounts and other savings.

The main function of Reserve Bank is to provide "stability in the general level of prices". Official Cash Rate is the regulator of a country's economical activity. The Central Bank will provide unlimited cash overnight at 0.25% above the cash rate to Banks against good security. Whereupon the bank will accept deposits from financial institutions with interest at 0.25% less than the official cash rate.

The Reserve Bank of New Zealand implements monetary policy by setting the Official Cash Rate (OCR), which is reviewed eight times a year.

The development in banks' interest rates is carried out by Norges Bank's key policy rate and the Norwegian Inter Bank Offered Rate (NIBOR). The most important monetary policy instrument of Norges Bank is Sight Deposit Rate.

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